Saturday, September 15, 2018

Taking a break
from the Kingsmen series, I decided to pen down my thoughts on portfolio
construction and management, which is a topic which investment bloggers seldom
(if ever) write about. During my time in the investment industry, I have had
the privilege of speaking with (and some may say "interviewing") many
hedge funds in order to ascertain if they are worthy of investment into, and I have
met many CIOs, CEOs and also Investor Relations personnel while doing due
diligence on these Funds. Some of the questions would invariably revolve around
the construction of their portfolio, the characteristics of it, how they
measure performance and how they monitor positions for risk and valuations,
amongst others. In case the reader is wondering, portfolio construction and
position sizing is actually of great importance in determining overall returns,
and most investors would prefer to concentrate on what to buy/sell rather than
how to manage a portfolio on an aggregate, macro-view level.

From these
meetings, I have built up a good mental model of how one should go about
structuring and reviewing their own portfolios, and I shall try my best to
articulate these thoughts here. I may miss out one or two points as this is a
discussion which can take up quite a bit of space, but I think below are the
salient points which I could like to make and which an investor should take
into consideration in reviewing their own portfolio's asset allocation.

Portfolio Construction

Position Sizing

As one begins
to allocate capital, one has to be aware of how large a position one takes in a
particular security with respect to the portfolio. This would impact the
exposure of each position to losses and conversely, how well the portfolio
would perform should there be significant gains. Some investors prefer to set a
limit on their largest position so as to cap their exposure in case something
goes horribly wrong - for example a 5% maximum position for a $100,000
portfolio means you do not invest more than $5,000 in any one company. What I
would recommend is to look at risk-reward trade-offs in order to determine
sizing for each position - positions with less risk should ideally be scaled up
higher in % terms compared to positions with more risk. Of course, risk itself
is subjective and cannot be quantitatively measured (no, beta is NOT risk), and
the investor has to review each position to decide on the amount of risk versus
reward which he is expecting. Obviously, this is not an easy task but it is
important and the investor should therefore spend time to think this through
before proceeding. I have heard cases of high-conviction positions which have
suffered badly due to a negative event, and this unsurprisingly causes
significant drag on portfolio performance.

For myself,
Kingsmen Creatives is my largest position at around 25% of my portfolio (based
on market value, vested portion only, excluding cash), and this is probably the
maximum limit I would go for a single position.

Number of Positions

This is
determined based on the ability of the investor to properly keep track of the
business behind each security, and also the comfort level with which he has
over its business characteristics. Of course, every investor differs regarding
the amount of information and monitoring he can handle. What I would recommend
is around 8 to 10 positions for a concentrated portfolio for a full-time
working adult, and around 15 to 20 positions for a full-time investor (i.e. no
day job). This is just a suggestion and is by no means a definitive guide to
the "right" number of securities.

For myself, I
currently have 11 positions but am aiming for around 14-15 positions in time to
come, and as I do more deep research on other promising companies.

Sector/Industry Exposures

Another aspect
to look out for is the sector or industry exposure for each position, and to
assess if there are any overlaps or gaps. For example, if an investor is
investing into a portfolio consisting of (for example) only property developers
(CDL, Capitaland etc), then he is only exposed to real estate as an asset class
and industry and therefore his risks (and rewards) would be concentrated on
just one sector. This would obviously be a boon if the sector does well, but it
would mean that the entire portfolio is exposed to risks belonging to just one
sector and there is no way to buffer against negative events (e.g.
government-imposed cooling measures).

Ideally, an
investor should try to diversify his exposure to different industries. There
are two reasons for this. Firstly, he should try to capture growth from the many
different industries out there which show promise and positive trends, examples
of which could range from artificial intelligence, advances in cancer research,
self-driving cars, tourism boom etc. By just limiting himself to one sector, he
is missing out on potential growth in a myriad of other sectors. Secondly, he
should diversify to lower the risks of a blowout or negative event in any one
particular sector, an example being the Chinese Government's recent move to
limit the release of games subject to more stringent conditions being imposed.
This would have hit game developers across the board and caused their
valuations to plummet. If the investor had only limited exposure to this
sector, then his investments in other sectors would provide buffer for the entire
portfolio.

To use my own
portfolio as an example, I am exposed to the following industries with regards
to each position, and I feel this sufficiently diversifies my portfolio:-

Equally
important is also the portfolio's exposure to different countries and regions.
Some would argue for direct investment in the stock markets of other countries,
but I feel that there are two major risks here - taxes and currency, which may
negatively impact the portfolio. Therefore, one can gain indirect exposure to
other regions and countries through investments in Singapore-listed securities.

As can be seen
above, I have exposure to mostly South-East Asia and North Asia, with only a
few companies (e.g. Boustead SG and Design Studio Group) giving me global and
Middle Eastern exposure too. I feel that there is more than enough growth in
this part of the world which the portfolio can capture, without venturing too
far from Singapore. On the other hand, investors may wish to invest in
international companies such as Unilever, Nestle, Apple or Amazon (just to name
a few), but these have their own risks (taxes, forex) and also generally higher
valuations which one has to be mindful of.

Presence of Dividends (and Dividend Yield)

Another
important criteria which one should evaluate for their portfolio is whether a
security pays dividends. Dividends can form an important component of total
return for a portfolio (for info, for my portfolio, it is 2/3 dividends and 1/3
capital gains for all my realized gains). One should review the frequency of
dividend payments (e.g. iFast pays quarterly, and so do most REITs) and also
the historical dividend yield.

Dividends are
good for cash flow if one is a long-term investor and does not wish to actively
transact, therefore the liquidation of any position (even partially) may be a
very uncommon event. This means the investor would have to rely on dividends to
extract some form of cash flow from his portfolio. These dividends can also be
reinvested in order to enjoy the much talked-about compounding effect over
time.

Note that
every company in my portfolio pays a dividend, except for Design Studio which
is at the trough of their cycle (and hopefully it will start paying again when
things recover), so readers can tell that this is a very important criteria for
me.

Cash Level

This is a
question I always ask Fund Managers at the end of every meeting - how much cash
do they typically keep within a portfolio? The usual answer varies from 0%
(fully vested) to around 15%, but the average usually hovers around 5% or so.
So what exactly is a "cash level" and why is this so important?

The cash level
within a portfolio would indirectly show an investor's comfort level with
current valuations and whether he perceives any opportunities to further add on
to positions or to switch out of less attractive positions to more attractive
ones. My recommendation is to never be fully invested (i.e. 0% cash level) as
this means that you would not have any ammunition to average down should there
be a market crash or severe downturn. Bear markets are a separate topic
altogether which I will do a blog post on some other day, but note that bear
market or not, it is always important to keep some cash handy as an
"opportunity fund" (note I have indicated this in my monthly portfolio
summary), ready to deploy when valuations become attractive.

Conversely,
cash levels which are too high (I would say in the region of 30% to 50%) would
suffer from "cash drag" and lower overall returns for the investor,
as it would mean that cash is not deployed in the most efficient manner to
generate returns for the investor. Some investors may prefer to sit on a
mountain of cash as it brings them comfort because they are always worried
about a crash coming round the corner. The sweet spot, I feel, would be a cash
level of around 5% to 10% (of course, this depends on the absolute value of
your portfolio - a $10,000 portfolio may be just starting out and you may have
another $10,000 to deploy, in which case it is "forgivable" to have a
cash level of 50% ($100,000 over $200,000)). This is to ensure you have enough
firepower for averaging down on selected attractive positions, while also not
letting too much of the cash rot away in a bank account earning close to zero
returns.

Portfolio Management

Now that I
have briefly discussed on portfolio construction, it's time to look into the
equally important aspect of portfolio management. By "Management", I
refer to how one should continually monitor and keep track of the portfolio,
much like the way a gardener keeps track of his young saplings or mature crop.
Using the plants analogy, a portfolio is something which you need to grow,
water and nurture so that it will perform well, and also save you lots of
heartache in case any position suffers a blow-up.

Monitoring and Assessment

Monitoring is
an essential feature of any portfolio and the astute investor should spend
sufficient time and effort to keep up with the financials and business outlook
for the companies he has invested in. At the very least, reviewing and reading
the quarterly statements, press releases and presentation slides should be
mandatory; while also reviewing any periodic or ad-hoc corporate announcements
concerning M&A, contract wins or other pertinent newsflow. Assessment here
would relate to assess news and articles on an on-going basis in order to
ensure one is kept abreast of the latest developments within each industry
which affects his investments - this may seem daunting as there is a lot of
information to track and read daily, but the investor should learn to filter
out unnecessary noise in an intelligent manner and also to ensure he can
speed-read and scan headlines for news which is deemed more important. In that
way, he can maximise the use of his time and not fall into the trap of
"analysis paralysis" - being swamped with too much information!

Re-balancing

Re-balancing
refers to the act of trimming certain positions or adding on to others, or to
sell away some positions in order to add new ones. In a nutshell, it means
making changes to your portfolio on an on-going basis. For myself, I do not
feel much need for re-balancing unless my investment thesis gets invalidated,
in which case I would need to sell one of my investments (e.g. in the cases of
MTQ, SIAEC and The Hour Glass). Otherwise, it can be a case of just adding on
to positions when they become suitably attractive, thereby increasing your
stake in that position.

The investor
needs to re-calculate his exposure upon any exit or entry (or addition to
existing) to ensure he does not violate any of the rules he set out in his
investment philosophy. An example would be not adding more to a position if it
means exceeding a threshold of say 10% of the portfolio. Another option is to
allow the limit to be exceeded temporarily but to slowly add to other positions
in order to dilute down the weightage of that position to a more manageable
level.

There are many
different ways to re-balance a portfolio so I will not go into too much details
as this is very personal for each and every person, but suffice to say this is
an exercise which should be carefully thought out and even modelled (yes, in
Excel!) before it is done, as it can have repercussions on performance and also
margin of safety.

Optional: Updating intrinsic values for all major
investments

This is an
activity which the investor can choose to do should he have sufficient time.
Once the latest financials are released or information provided on certain
actions or strategies for the Company, one can re-assess and re-compute their
intrinsic value for the Company. This is to review each position to see if the
risk-reward ratio has changed (for better or worse) and to decide if
re-balancing is needed, or if there is a need to sell to raise cash levels for
a more attractive opportunity.

Conclusion

Constructing a
robust portfolio is a time-consuming affair and the investor should be mindful
that it can only be done with a lot of patience, study and also experience
(i.e. making mistakes). The idea here is to start off with a few investment
ideas and slowly curate the portfolio as one evolves and crystallizes one's
investment philosophy. This should obviously be an iterative process as
portfolios are dynamic and should not be stagnant or be perceived as static, as
businesses are also changing and evolving daily. The above pointers should
serve as a useful guide for anyone who wishes to start a portfolio but does not
know the various aspects to consider.

Stay tuned for
Part 3 of the Kingsmen analysis coming up in my next post.

Monday, September 10, 2018

Part 2 of this
series exploring Kingsmen Creatives will focus on the Group's financials,
namely revenue trends, margins and the all-important cash flow. I shall do this
from a practical standpoint - what an investor looks for is essentially cash
which a Company generates, in order to justify the valuation paid for a
business. While profits are the most looked-at number when investors open up a
set of financial statements, ultimately it is the cash flow that you receive
which you can spend - you cannot spend profits! So this analysis shall focus
more on the cash flow generative aspects of the business; as profits can often
be affected and influenced by accounting policies, assumptions and also one-off
exceptional items.

The above
table summarizes the 8-year historical numbers for Kingsmen. I have deliberately
left out the entire chunks of P&L, Balance Sheet (B/S) and Cash Flow
Statement (CFS) even though I do have them all on file (include all
quarterlies), because it would be too heavy for the reader and what I wish to
do is to zoom in on important numbers and ratios to simplify the analysis. We
shall therefore look at revenue trends, margin trends, expenses (and some line
items), NPAT margins, cash and net cash balances and FCF generation. I will
also briefly talk about dividends history for the Company in a later section
within this post.

Revenue Trends

Kingsmen's
revenue was on an uptrend from 2010-2014, and it was only in 2015-2016 that it
took a dip, mainly due to the luxury segment for Interiors being negatively
impacted. 2017 saw a year on year (yoy) drop of -6.8% in revenue, and this
seemed to signal that growth had plateaued and that the Group could no longer
increase top-line. However, Benedict (Chairman) did mention that increasing
revenue was not an issue for the Group, but the problem was in getting decent
margins for the work they did, and also whether they had the manpower and
expertise to pull off these contracts in a timely and efficient manner. The
conclusion from this is that the Company did not wish to merely
"chase" contracts to make top-line look good and to show
"growth", but instead remained selective on the type of work they
chose in order to ensure they earned a decent margin and that they could
deliver on their obligations. Of course, this was predicated on the fact that
gross margins and also EBIT and net margins had been impacted due to the luxury
spending slowdown which began in 2015 with China's Xi Jinping clamping down on
lavish spending and corruption, which made many luxury brands rethink their
strategy of rapid expansion and opening large stores in a roll-out campaign
(recall that Kingsmen had a distinctive edge when it came to such roll-out
programs as they could coordinate the simultaneous opening of stores by a
specific brand across multiple countries due to their presence in these
countries).

Of course, one
could argue that with the current state of affairs (i.e. e-commerce remaining
dominant and growing and replacing more brick-and-mortar business), Kingsmen's
revenue would also be under pressure. But the E&T division would still be
able to take on more jobs as the MICE industry is still booming and expansion,
while more and more theme parks are sprouting up in Asia and the Middle East;
plus the Interiors Division has restructured itself over the last 3 years to
diversify its client base and also preserve gross margins. Hence, there would
still be opportunities for revenue growth as Kingsmen tackles new trends (e.g.
experiential malls like the upcoming Funan Centre), and this is also not
accounting for potential new revenue streams from their planned IP division
(more of this in Part 6).

Margin Trends

No discussion
is complete without talking about margins, and here I would like to focus on
the gross margin ("GPM") as well as the key expenses which flow down to
the net margin ("NPM"). There will also be some discussion on future
expenses, trends in expense movements and how I see margins trending over time.

GPM for
Kingsmen is indicative of how well they can price their services and from the
table, one can see that Kingsmen's GPM is remarkable consistent at around ~25%.
However, quarterly earnings would show that post-2015, GPM actually dipped to
around 22% (1Q 2016) as luxury retail expansion slowed and Kingsmen had to go
for fit-outs for more mass market and affordable fashion-type clients. These
jobs obviously have more contractors competing for the same pie and hence,
Kingsmen had to price their services lower to remain competitive and hence
suffered a fall in GPM. However, in 2017 and 2018, GPM has managed to stabilize
at 25% over all divisions as Kingsmen has expanded their client base and also
taken up different types of jobs in order to fill the order book (e.g. cafes
like Greyhound Cafe). So my conclusion here is that GPM should not be a major
issue for the Group going forward as their E&T division enjoys good
economics and Interiors has also somewhat recovered.

For NPM,
however, one can clearly see that Kingsmen has been hit badly in 2016 and 2017.
Where NPM used to hover between 5% to 7% (and Benedict also mentioned that the
Group managed this for around 10 consecutive years despite competition and
overall higher costs), it has now dipped to 3.6% in 2016 and 3.2% in 2017.
Management has taken pains to reiterate that this is NOT a situation which they
are pleased with, and they are working hard to move NPM back up to the previous
5% to 7% level. The way I see it, this would be tough in the near-term as there
has been a structural change in the retail sector (more on this in Part 5)
which has permanently crimped spending by multi-national luxury brands.
However, there are some mitigating factors which may lift overall NPM which I
will detail below.

The 3 key
items of expense for Kingsmen would be D&A (Depreciation and Amortisation),
Rental Expenses (as their current premises at 3 Changi South Lane is rented)
and staff costs (as the Group has many project management teams and offers
services rather than products). Depreciation is slated to increase as Kingsmen
has just completed construction of their new HQ in Changi Business Park (the
building is named "The Kingsmen Experience") and will spend around
$35m in total on the cost of the land + property. This translates to around
$1m/year in depreciation, which is roughly the same as the ~$1m/year in rental
expense which Kingsmen is paying. So this is simply substituting rental for
depreciation and would have no P&L impact, but cash flow would improve
substantially once Kingsmen shifts over. The lease, however, was signed up till
April 2019 and so FY 2019 should see 4 months of rental expenses + depreciation
expense, after which the financials would only see the depreciation expense
bumping up from the new HQ.

As for staff
costs, this has climbed relentlessly as Kingsmen builds its capabilities and
teams and also because of inflationary factors (salary increments) as well as
bonus payments (for achievement of targets in prior years, except 2017). As
Kingsmen rewards staff based on net profit margin by division, this
incentivises staff to try to achieve higher net margins for the division, while
not compromising on work quality or standards. For 2Q 2018, Kingsmen saw a +8%
increase in staff benefits expense mainly due to advance hiring for their new
IP division (NERF FEC), which I will elaborate on in Part 6.

To summarize
this section, the spot of light at the end of the tunnel may start getting
brighter once the new IP division kicks off and starts contributing, as a lot
of the costs are front-ended and sunk in earlier periods and we will only see
contributions in later quarters. Net margins may be boosted by better economics
from the new division and also better cost control measures undertaken by the
Group for their existing Interiors and E&T divisions.

Cash Balance
and Cash Flow

From the
table, one can see that Kingsmen has significantly increased its cash balance
from 2010 till end-2017, from $29.9m to $73.6m. This is despite significant
spending in the years 2015 & 2017 (2015 - $15m for purchase of K-Fix & 2017
for the purchase of land for new HQ and on-going progress billings for
construction-related costs). Borrowings have also not increased significantly
up till end-2017 (at just $14.0 million), with net cash for the Group at around
$60m. However, as at 2Q 2018, total debt had increased to $26m ($10.4m ST and
$15.6m LT) while net cash had declined to $44m. This is in line with what
Management had communicated regarding borrowings to fund part of the
construction of the new HQ. Moving forward, I would expect the debt to increase
more in order to fund the development and construction of Kingsmen's first NERF
FEC, but this should be balanced out by healthy operating cash flow from their
core business.

For the cash
flow section, one can see that for every single year from 2010-2017, Kingsmen
has generated positive operating cash flows. As explained, capex was elevated
in 2015 and 2017 for above-mentioned reasons and for 1H 2018, capex has hit
around ~$10m thus far (residual construction costs for the new HQ). There
should be no more HQ-related capex for 2H 2018, and capex should decline
significantly for the remainder of the year. I would expect 2018 to be another
year of positive operating cash flow, as there are signs of recovery in the
Interiors business and also good prospects for the E&T division (including
new contracts won and announced by Kingsmen in 1H 2018). Capex would definitely
be higher in 2019 as construction of the first NERF FEC should begin with
gusto, but the plan is for some of the capex to be borne by business partners
so that Kingsmen does not need to cough up too much cash. More on this in Part
6.

Free-Cash-Flow
("FCF") has always been positive with the exception of 2015 (purchase
of K-Fix). FY 2017 FCF yield is a low 1.5% as this was distorted by the
construction-related expenses for the new HQ. If we assume a steady state
maintenance capex amount of $2.5m/year, FCF for 2017 would be around ~$11m and
FCF yield would be around 10% - a very compelling proposition indeed.

Dividends

Dividends are
an important component of total returns for any investment and also form the
main reason why I purchased Kingsmen and a few other companies. My thesis is
for both growth and yield, and Kingsmen's payment of regular dividends over the
years provides good support for retaining this investment, while I have, over
the years, reinvested the dividends from Kingsmen into other promising
companies. It can be seen from the table that during the good years
(2010-2014), Kingsmen paid out a total of 4c/year twice-yearly, for a pay-out
ratio of between 40% to 50%. Dividends only started falling from 2015 through
2017 as earnings got hit by higher expenses and poorer retail sentiment, but
Kingsmen still managed to pay a total of 2.5c/year for 2016 & 2017, which
translates to a steady yield of ~4.6% at current market price of 55c.

From dialogues
with Management and recent communication, I believe 2.5c/year is a sustainable
level of dividend even after accounting for higher debt levels and the
impending capex for the IP division. Therefore, investors purchasing at current
market price can enjoy a steady 4.6% yield while waiting for catalysts to play
out.

Part 3 of the analysis will delve into the different
divisions of Kingsmen, their overall performance and also talk a bit about their
prospects. This will differ from the industry outlook as it is more focused on
the clientele, margins, mix and other numerical details.

Wednesday, September 05, 2018

As readers of
my blog way back from 2010-2012 would probably know, back then I performed a
detailed 5-part analysis on Kingsmen Creatives and posted in on my blog. Of
course, much has changed in the last 6.5 years and the Company has also evolved
and changed during that time, some parts for the better, and other parts for
the worse. My initial idea was to present the thesis to readers and then
highlight the sections which had altered or changed significantly since then;
but this would have been tough for those who are not familiar with the Company
or what they do.

Instead, I
thought I would present the Company in a structured manner starting from a
fresh slate, highlight the different aspects of it and packaging it in parts to
cover it holistically and from all angles. This would cover the basic business,
clientele, divisions, financials, margins, competition, strategic and future
plans, changes to work culture / physical location, management and other pertinent
details, both quantitative and qualitative. I believe that currently, within
the investment blogosphere, there is no record of such a comprehensive analysis
of a small-cap listed company - some sell-side reports do come pretty close but
they generally tag themselves to a "target price" or "fair
value" which is as long as.....one year. This detracts from my mission of
long-term investing and distracts the reader from focusing on what is really
important - the essence of what makes a Company great and why it should remain
in one's portfolio for a significant period of time, barring a significant
deterioration in the fundamentals and financials or a strategic shift in
Management's focus and attention.

I will also
cover the valuation in the latter part of the posts, but will come from the
angle whereby I will comment on existing valuations and give a comparison with
available competitors and industry players; but will NOT provide a fair value
target price for what I deem is a very long horizon investment. Part of the
reason shall be explained in the appropriate section on "valuation",
but it should be easy enough for the reader to comprehend that with limited
available information, building a robust financial model of any sort is close
to impossible. Instead, I invest because I assessed Management's quality, the
strength of the business and the robustness of the planning and steps taken to
grow the business. These will be detailed in posts which will be split into
parts, as follows:-

Part 1 -
Introduction and Historical Background

Part 2 -
Financials, Margins and Cash Flow

Part 3 -
Divisional Analysis

Part 4 -
Management Quality and Candour + Order Book

Part 5 -
Competition and Industry Outlook

Part 6 -
Future Plans, Catalysts and Strategies for Growth

Part 7 -
Valuation, Sentiment and Risks

Part 1 (this
post) will give a brief and concise introduction to the Group and its
divisions, and also mention some of Kingsmen's clientele. Part 2 will delve
into the financial highlights and the numbers which matter, including margins,
cash flow and dividends. Part 3 will focus on the divisional analysis for
Kingsmen, including the sales mix and margins for each division over the last 8
years. Part 4 will discuss the qualitative aspect which not many may talk about
- Management candour and quality and also changes in the Management over the
years, including succession planning and how staff are compensated. Part 5 will
talk about Kingsmen's competitors - with a brief mention of Pico Far East
(listed in Hong Kong but not strictly a competitor in many respects) and also
Cityneon Holdings (which has been in the news a lot lately on their stellar
results and the acquisition of their fourth intellectual property
("IP")). Part 6 is where I talk about the future for Kingsmen and
their plans for growth in a new direction, with the Feb 2018 announcement of
their tie-up with Hasbro to do up the NERF franchise. Part 7 ends off with a
valuation discussion on Kingsmen (various methods to be considered) and also
the overall sentiment surrounding the Group.

There may
obviously be some overlap between sections which cannot be avoided, as some
parts may reference other parts in an attempt to explain the overall thesis and
why the Company remains compelling. As an example, during the divisional
analysis I would also inevitably mention how each industry is faring in
relation to the divisions, while Part 5 would also talk about this but also
present trends in each industry and how they would impact Kingsmen and their
competitors.

Disclaimer: Please note
that all content which will be displayed here is obtained from public
resources, including but not limited to sell-side reports, the Company's annual
report(s), discussions with the Management at AGMs and also a study into the
industry characteristics and competitive analysis through other pertinent
reports. This is NOT intended to be a recommendation as to the merits or
demerits of this investment and should NOT be construed as a recommendation to
either purchase, hold or sell this security. This merely serves as a record of my investment thought process, how I view and analyze information, my thoughts
on the Company (and industry) and how I see the future panning out.

Introduction

Kingsmen
Creatives is a leading communications and design group established in 1976 with
21 offices around Asia serving global clients. It has four main divisions
namely Exhibitions and Thematics ("E&T"), Retail and Corporate
Interiors ("Interiors"), Research and Design ("R&D") and
Alternative Marketing ("AM").

The Group is a
market leader in the MICE industry, MICE being the "Meetings, Incentives,
Conventions and Exhibitions" space, and helps in the organization of
events such as Singapore Air Show, Art Stage Singapore and Formula One Night
Race just to name a few events. E&T division is also responsible for
installations at museums in countries such as Singapore and the Middle East, as
well as for theme parks such as Universal Studios Singapore (back in 2009) and
Disneyland Shanghai. Their work is also displayed at places such as the
Singapore Fintech Festival 2017 in Singapore, Sourcing Taiwan 2017 in Taiwan,
Hyosung at Textile India 2017 in India, BMW Motorrad at Thailand International
Motor Expo 2017 in Thailand as well as Seoul Lounge at Seoul Biennale 2017 in
South Korea.

For Interiors,
Kingsmen is well-known for their high quality of work and also on-time delivery
for their clients, which span a very broad range from AIA, Fendi and SingTel,
to Ralph Lauren, Tiffany and Co and Van Cleef and Arpels. Many of these are
well-known international brands and have been clients of Kingsmen for many
years, forming their repeat customer base which provides a recurring form of
revenue. For Interiors, other clients would include Armani Exchange, La Perla,
Michael Kors, Zara, Massimo Dutti, Ted Baker and Longchamp.

For more
details and information on Kingsmen's work and clientele, please do download
their Kingsmen Watch 2018.

R&D and AM
are divisions which add value and support the main divisions of E&T and
Interiors, and these would include events and road-shows and also pop-up stores
which are a feature of the new retail landscape. More will be mentioned later
on regarding the evolution of the retail landscape which is a key feature of
how Kingsmen is adapting, under Part 3 where I will do a detailed divisional
analysis for Kingsmen on their two main divisions.

Historical Background

Kingsmen was
established 42 years ago with founders Benedict Soh and Simon Ong, each of whom
owns around 25% of the Group. They started out doing fit-outs and brands and
stressed on delivering a high quality of work even as the industry was saturated
with many competitors who offered the same types of services. Kingsmen
differentiated themselves by being more than just a "contractor" -
instead they focused on on-time delivery, quality and slowly built up more and
more scale within the business. This allowed them to push ahead in terms of
market share and also build up good branding for the business - all these moves
attracted the attention of international brands which proceeded to do business
with Kingsmen as it saw that the Group could deliver the level of quality
required for international brands to expand into the Asian region.

When Kingsmen
started out, they even did the Orchard Road Christmas decorations and Benedict
mentioned that he was proud of being able to achieve that milestone despite tough
weather and traffic conditions! Though they have come a long way since then,
the Group did not forget its past and still did up the Christmas decorations
for 2017 and also recently won the bid for both the National Day Parade 2018
and the historical upcoming National History Event 2019 (which will showcase
the bicentennial founding of Singapore since the year 1819).

The next Part
2 of this comprehensive analysis will talk about the financials for Kingsmen
and I will present a summary of key financial numbers and ratios over the last 8
years (2010-2017). Discussions will also centre around margins, balance sheet
strength, debt, capex, cash flow and dividends.

Friday, August 31, 2018

As was the
style with my blog previously, I would always do a month-end review and summary
of all portfolio positions. The display would only include my purchase price,
market price and capital gain/(loss). Please note that the portfolio review is
simply to catalogue all corporate announcements and associated news flow
relating to my positions - it is NOT to be construed as an attempt to
"brag" about portfolio size or to sound arrogant over specific
security choices. If there is any indication of this occurring, then I
apologize in advance.

1) Suntec REIT - There was no news from
the REIT for the month.

2) Boustead Singapore Limited ("BSL")
- BSL released its 1Q FY 2019 earnings on August 13, 2018. Revenue was up +18%
yoy to $107m, while GP was up +26% from $33m to $41.4m. NPAT was up +315% to
$12.2m, mainly due to a one-off gain of $5.9m from the disposal of a property
held for sale (25 Changi North Rise - see BPL) and forex gains of $1.5m. Balance
Sheet continued to remain robust with cash of $$280.5m against total debt of
$72m (net cash of around $208.5m). OCF was $22m and capex excluding the
purchase of WhiteRock Medical was just $161k, so FCF was ~$20m. Acquisition of
WhiteRock Medical announced in June 2018 amounted to $19m (as announced), but net
of cash the purchase consideration was less at $15.5m. Divisional performance
saw improvements across all divisions, with revenue rising on a yoy basis (for
Geo-Spatial, the change was due to the change in revenue recognition policy
from the adoption of SFRS(I) 15). The change front-loads more of the revenue from
the maintenance portion of the contracts early on, and less revenue is thus
recognized at the back-end of the contract.

PBT for all
divisions also improved but note that energy-related engineering was impacted
by exchange gains, while real estate solutions was helped by the disposal of a
property (more in BPL below). The good news is that order book backlog improved
to $304m as at end of 1Q FY 2019 (consisting of $102m under Energy-Related
Engineering and $202m under Real Estate Solutions). Comparative numbers for 1Q
FY 2018 were $209m total order backlog (of which $72m was for Energy-Related
Engineering and $137m for Real Estate Solutions). So to summarize:-

Total Order Backlog:
$304m (+45.5% yoy)

Energy-Related
Engineering Order Book: $102m (+41.7% yoy)

Real Estate
Solutions: $202m (+47.4% yoy)

I am planning
for a comprehensive review of BSL and this should come in due course (slated
for perhaps October if I am still blogging by then), and hopefully it will come
out before the release of the 1H FY 2019 earnings (which should include the new
"Healthcare" division by then).

3) Boustead Projects Limited ("BPL")
- BPL released its 1Q FY 2019 earnings on 10 August, 2018. Revenue was up +7%
yoy to $48.7m, while GP was up slightly more at +8% yoy to $15.7m. NPAT was up
+73% yoy to $10m, mainly due to the one-off gain mentioned earlier under BSL. Cash
on Balance Sheet increased further to $129m from $111m 3 months ago, and total
debt remained fairly constant at $69.1m. FCF continued to be very healthy, with
1Q FY 2019 registering an OCF of $12.8m and capex of just $31,000; and overall
cash inflow from the three sources came to $17.6m.

On a
divisional level, design and build revenue was up +9% yoy while leasing revenue
was down -5% yoy, and this was mainly due to lease expiry at 85 Tuas South
Avenue 1 in January 2018, which was partially offset by fees from BDP. PBT for
leasing dropped more significantly, by -30% yoy, due to higher overhead
expenses, investment in new capabilities and additional professional fees.
While this is a cause for concern, I will treat it as an investment in BPL's
future and will continue to monitor this for now.

One piece of
positive news is that BPL has managed to secure a new tenant on a long-term
lease for 85 Tuas South Avenue 1 (which has been vacant since January 2018).
However, as there are A&A works ongoing to prepare this property for the
new tenant, rental cash flow will only commence from FY 2020 onwards (i.e.
April 2019 onwards). Pre-committed space at ALICE @ Mediapolis and the first
phase of marketing of the Boustead Industrial Park in Vietnam are proceeding
well, and should bear fruit in the next 12-18 months.

4) Design Studio Group ("DSG") -
There was no news from DSG for August 2018. The Group had just released their
2Q 2018 earnings on July 19, 2018; the numbers showed some improvement with
revenue increasing +44% and NPAT rising +340% (albeit off a low base). $109.5m
worth of new orders was secured in 1H 2018 alone (for an average of around $18m
per month), compared to just $13.5m in the whole of 1H 2017. Order book as at
end-June 2018 stood at $157.1m (+10.8% yoy), which was $141.8m as at end-June
2017. With the arrival of the new CEO Edgar Ramani last year, DSG is undergoing
a slow, steady but painful transformation to wipe the slate clean of old
inventories and also to better prepare the firm for more consistent,
sustainable growth. The AGM slides had also demonstrated that the new
Management (along with newly-appointed CFO Ronald Kurniadi) has garnered some
momentum is securing more contract wins; now they have to demonstrate that they
can deliver, collect on receivables and also earn a decent margin. I will have
to closely watch DSG in future quarters as it is currently my worst-performing
position.

5) Kingsmen Creatives - I must admit I am
puzzled on Kingsmen. No doubt the last 2-3 years has seen earnings fall off a
cliff and net margins contracting from a once-healthy 6% to 7% to the current
2% to 3%, but recent news and announcements on contract wins and also the
tie-up with Hasbro for the NERF FEC (Family Entertainment Centres) did not seem
to spark any buying interest at all, thereby keeping the stock at depressed
trough valuations. This is actually a blessing in disguise as I managed to
accumulate more shares in Kingsmen for my CPF IA at an average price of
55c/share, and this comes with a 4.6% yield paid twice-yearly (1c interim, 1.5c
final).

August
corporate announcements would include the incorporation of a wholly-owned
subsidiary in Singapore called NAX (Singapore) Pte Ltd with a paid up capital
of SGD 1.6m, as well as the Group's 1H 2018 earnings announcement. More will be
shared on this in my detailed Kingsmen review and report coming up next month,
but in a nutshell, revenue was up +8.9% yoy while GP was up a smaller +2.8%.
NPAT was up +6.1% and an interim dividend of 1c/share was declared, unchanged
from last year. On August 21, 2018, Kingsmen also announced that they had
increased the paid-up capital in their K-Fix (Nantong) subsidiary from zero to
USD 3 million, demonstrating their commitment to the fixtures business and
possibly also in anticipation of more contracts due for JEWEL and NERF FEC
construction.

6) VICOM - VICOM announced its 2Q 2018
earnings on August 6, 2018. For the second quarter, revenue increased by +2.4%
from $24.1m to $24.7m. EBIT increased by a higher +5.1% from $7m to $7.36m but
NPAT only increased by +2.9% yoy mainly due to higher tax expenses. The balance
sheet remains clean with no debt and cash balance of $97.9m, and FCF generated
in 2Q 2018 was $4.4m versus $5.2m in 2Q 2017. An interim dividend of 13.46c was
declared, against 13.12c a year ago. This represents a pay-out ratio of exactly
90% based on the 1H 2018 EPS of 14.95c/share. I am very happy to continue
owning this Company as it is providing me with a yield of almost 10.6% (at
36c/year) based on my purchase price of $3.408.

7) Straco Corporation - Straco announced
its 2Q 2018 earnings on August 14, 2018. Revenue fell by -6.4% yoy from $30.2m
to $28.2m, and this was mainly due to a slight dip in visitor numbers (~1.2%
lower yoy at 1.22 million visitors) and also a tax waiver not being issued yet
for ticket revenue collected for SOA. NPAT fell by -5.1% yoy $10.8m, and 1H
2018 NPAT stood at $14.4m, a drop of -29.3% yoy mainly due to the operational
issues at the Singapore Flyer which caused a shutdown from mid-January till
end-March 2018. The Balance Sheet remains very healthy with $180.5m of cash and
debt of $44m (note that Straco pays down $12m worth of debt every year - or $1m
per month). FCF also remained strong at $12.2m, though down compared to 2Q 2017
with $16.4m of FCF. Currently, there is no cause for undue worry as cash
continues to build up on the Balance Sheet despite the payment of a 2.5c/share
final dividend for FY 2017. Potential catalysts would include the redevelopment
of the Singapore Flyer (Flyer 2.0) as well as higher ticket prices for both SOA
and UWX (subject to the Chinese Government's approval).

8) iFast Financial - iFast had just
released their 2Q 2018 financials in late-July 2018. I will avoid giving a
run-down of the numbers as the Company has many numbers to run through - gross
revenue, net revenue and also NPAT split by territories and recurring /
non-recurring revenue. AUA (assets under administration) hit a new record high
of S$8.33b as at June 30, 2018, revenue was up +25.4% yoy and NPAT was up +40.4%
yoy. Balance Sheet remains debt-free with cash of $25.8m and very strong FCF of
$9m was generated (these are two factors which determine why I like this
Company). The Group declared a 2Q interim dividend of 0.75c/share, up from
0.68c/share a year ago.

Also, on
August 21, 2018, iFast announced that it had appointed PwC Corporate Finance as
the lead financial advisor in relation to a potential capital injection for
their Greater China business. iFast's intention was to enlarge the share
capital of their Hong Kong and China holdings by about 15%. Assuming the
dilutive effect kicked in, it would improve the Group's NPAT for FY 2017 by
around S$0.34m (as the China business had incurred a loss for FY 2017).

9) Keppel DC REIT - The REIT announced, on
August 7, 2018, that it will be expanding its footprint in Sydney, Australia
with a new shell and core data centre. This will be built on vacant land and
will cost between A$26m to A$36m (final costs yet to be determined) and will be
backed by a 20-year triple-net master lease when completed. It will feature a
minimum NLA of 86,000 sq feet and is expected to be completed between 2019 and
2020. This transaction will increase the WALE of the portfolio from 8.8 years
to 9.9 years assuming the transaction had occurred on June 30, 2018, and the
portfolio aggregate NLA will increase to 1.198m sq feet.

10) Frasers Logistics & Industrial Trust ("FLT")
- FLT had a slew of announcements in August 2018, which I will try to
summarize. Earnings-wise, revenue for 3Q FY 2018 (the REIT has a Sep year-end)
increased by +22.6% yoy from $40.2m to $49.3m, adjusted NPI was up +27.4% and
income available for distribution was up +22.4%. This was mainly due to the
acquisition of German and Dutch properties as announced by FLT some time back;
but though income rose a lot, a rights issue also enlarged the issued share
capital base and therefore DPU was up by just +2.9% from 1.75c to 1.80c.

Aggregate
leverage at 36.3% meant that the REIT would have room for more borrowings for
accretive M&A, and weighted average cost of borrowings was low at just 2.5%
with average weighted debt maturity of 3.2 years (all as at June 30, 2018).

On August 6,
2018, FLT announced the divestment of Lot 102 Coghlan Road in South Australia
for A$8.75m, which represented a +36.7% premium to book value. This is one of
the smallest and oldest assets within the portfolio, representing just 0.2% of
the total portfolio value. The divestment therefore allows FLT to recycle
capital as this asset has limited future income growth potential.

On August 31, 2018, FLT announced the acquisition of two properties in Sydney and Brisbane for A$62.6 million. The average property age is 1.0 years with WALE of 5.7 years, and these acquisitions will be financed from the proceeds of the sale of the two properties 80 Hartley Street and Lot 102 Coghlan Road. The acquisition should be completed by September 2018 and FLT's portfolio will then contain 82 properties with GLA of approximately 1.9 million square metres with portfolio value of around ~A$2.9 billion.

11) NetLink NBN Trust("NetLink") - NetLink released its 1Q FY 2019 earnings
ended June 30, 2018 (it has a March 31 year-end, in line with SingTel). Revenue
was up +2.8% against forecast and EBITDA margin was at 70.8%, while PAT was up
+27% against projections at $19m. NAV per unit stands at 78.8c/share and there
was a +2.1% increase in residential and non-residential fibre connections,
while NBAP connections saw a +35.2% increase since March 31, 2018. The Trust is
on track to deliver on FY 2019 projected distribution, and the distribution
yield should be around 5.7%.

General investment blog trends and observations

As I had been
away from the blogging scene for the last six and a half years, I thought it
might be good for me to pen down my thoughts in general on how the blogging
scene has evolved, the general tone and language used in investment blogs
nowadays and also the overall sentiment I detected through others' portfolios
and transactions. Please also note that I am not pointing fingers at any
particular blog out there - these are just general observations I made and am
putting down on paper for future reference.

More entrants,
less details

The first
general observation is that after I stopped blogging, the blogosphere has
literally exploded with many new entrants. Some bloggers may just be starting
out, while other veterans have continued blogging. This has undoubtedly
expanded the investment blog universe and given readers a plethora of choices
in order to enhance their knowledge on companies, industries, markets and
trends. However, I also realized that many of the blogs contained less detail -
namely on the investment thesis behind each purchase or sale, why the portfolio
was being structured this way, a comprehensive review and assessment of risks
versus rewards, and also an admission of mistakes made along the way. Some of
the above attributes were either absent, or not fleshed out in sufficient
detail to justify a particular action.

Many blogs
simply provided an account of their portfolio structure (by % or monetary value
per security), some in a pie chart, others in tabular format, their
transactions (and associated gains or losses) and also a simple summary of
their investment plan or philosophy. This is perfectly fine if you intend to
keep a sort of "diary" for transactions online, but I feel it may
fall short if the investor wants to studiously keep track of his rationale for
buying/selling, his thought process behind mitigation of risks, and also his
views on valuation and business prospects.

More trading,
less investing

Obviously, I
cannot expect everyone to be an investor, much less a value investor; but most
of the "investment" blogs should probably be named
"trading" blogs. This is due to the frequency of transactions, most
of which are conducted at a frenetic pace - buy this, sell that, with not much
justification as to why one should stop owning a good business and switch
instead to another. Most of the blogs seem to focus more on "taking
profit, locking in gains, setting a stop loss" rather than wanting to own
more of a great business and to see it grow with time. This is something I find tough to comprehend.

Apparently,
capturing "maximum upside" with frequent trades seem to be more the
fashion than owning a stable, consistent portfolio of companies which grow over
time and which contribute a steady stream of dividends to the patient investor.
I see two reasons for this - the increasing ease with which one can gain access
to trading apps contributes partly to the increasing trend with which people tend
to "flip" stocks (or "stir-fry" stocks if you are aligned
with the China way of thinking), making holding periods increasingly short. The
other reason is because most of the newer investors have never ever experienced
a bear market, thereby letting ebullience take over their senses and clouding their vision with a perpetually sanguine outlook. The requisite
"buffer" which is essential to any portfolio seems to be conspicuously
absent from most investors' portfolios or even if there was one, does not seem
to be articulated in a detailed enough fashion for even the investor himself to
gain comfort. If all they have seen thus far is a steady stream of rising prices, then
why is there ever a need for a buffer?

More macro
appeal, less corporate deep-dive

This is
probably one of the most glaring observations I have made over the course of
the last few years - where headlines get larger and more glaring in a world of
never-ending news, and where media outlets continually spew a steady barrage of head-turning, gut-wrenching bad news. Amidst this roller-coaster of
emotions, investors who follow this incessant flow would inevitably feel
nervous and emotional about the world and their shareholdings. And this, in a
nutshell, is going to be extremely detrimental to their long-term wealth.

Let me put it
this way - there is ALWAYS some kind of bad news in this world. The job of the
media is to highlight the bad news and to accentuate it as much as possible so
that they can sell subscriptions and attract eyeballs. That is their job and
objective and they perform it creditably and admirably. However, as an
investor, we would do ourselves a favour by ignoring around 98% of the
headlines, and just focusing on the few which matter (~2%) - and these should be the
ones which tie in to corporate and industry news and which directly have an
impact on the companies within our portfolio.

Deep-dive due
diligence is by no means easy. It is tedious, frequently boring, time-consuming
and also difficult. News flow can help in this regard - by zooming in on
articles written on companies, one can immediately get a summary of the
important points one needs with regards to any corporation, without needing to
undertake a read of the latest annual report or (horrors!) the prospectus. But
many blogs do not devote sufficient time to discussing corporations in deep
detail, instead letting macro-factors dictate their buy and sell decisions with perhaps just a superficial, surface-level review of the business. It seems washing machines and refrigerators receive much more due diligence from buyers than shares in companies......

The next post
(or series of posts) would be on Kingsmen Creatives, where I will do a
comprehensive and deep review of the business and also talk about how I feel
the shares are currently providing a lot of value, along with a respectable yield with limited downside.

Saturday, August 25, 2018

As promised, I
present below my revamped portfolio after my six and a half year hiatus. I will
not be using this post to go into details on each new position, but it is more
to highlight how the portfolio has evolved over the years where I have added to
existing positions, and also initiated on new positions to hold for the
long-term. Note that the portfolio has also expanded from the six positions I
held as at end-Jan 2012, to the current eleven (11) holdings that I now own. This
is in line with my intention to diversify my holdings instead of concentrating
too much on a few core positions, as events had occurred in the intervening
years which made me realize that there is only so much you can know or control.
There are other reasons for increasing the breadth of the portfolio, which I
will detail in later sections.

As can be seen
above, I have included two additional columns (but only in this July version) -
the profit % after including dividends and also the CAGR (i.e. holding period
return) for each position. This gives more colour and also helps to explain how
my philosophy in being prudent and holding good companies over the long-term
translates to decent (but not spectacular) holding period returns. Most
importantly, I believe that these companies can weather a bad storm and
economic crisis and still be able to emerge battered but relatively unscathed,
due to their strong Balance Sheet and prudent Management style and also low
debt levels.

One notable
aspect is how my cost has increased over the years, from the $252,800 to the
current $469,474. This was the result of disciplined additions over the years
to the portfolio, while limiting divestments mainly to the three companies
mentioned in the previous post. My philosophy is to continue to increase my
stakes in well-run, prudently-managed companies which are under-appreciated by
Mister Market, and over the years this has translated into investments both in
existing holdings as well as new holdings. The idea going forward is to
continue to add to the portfolio in a disciplined manner to raise the cost base
in order to improve the overall absolute dividend.

The reason for
the realized gain being significantly higher (from $69,550 as at end-Jan 2012
to the current $201,653) was due mainly to dividends, and was not a result of
stellar capital gains from any one security. In fact, though the initial years
2012-2014 saw very good performances, this was dampened by 2015 and 2016 where
performance lagged badly when certain companies within the portfolio suffered
from business issues and competition. That said, the state of the portfolio now
is such that the companies within suffer from woeful neglect and a lack of
sell-side coverage, and has priced in most of the pessimism over the last 18-24
months; therefore I would argue that most present very good value if you have a
3-5 year time horizon with limited downside potential (barring a sharp and
unexpected recession or downturn where investors are forced to sell their
holdings).

The dividends
received over the years have been compiled as follows:-

2012: $14,185

2013: $17.680

2014: $16,709

2015: $15,387

2016: $23,215

2017: $24,585

2018: $12,448
(year-to-date, accounts for received dividends)

Total 2012-2018 (YTD): $124,210

Another
notable difference is the use of my CPF Investment Account, which was only
activated this year. As I have already paid off my HDB loan in late-2015, I
managed to accumulate a sizeable balance in my CPF OA account, out of which
only 35% can be utilized for equity purchases.

The emphasis
over the years has been capital preservation with a constant focus on risk. It
is always important for me to protect my downside and avoid losing money than
to shoot for the stars and end up crashing into Earth like a supernova. Of
course, having a concentrated portfolio of 6 companies back in 2012 meant there
would always be significant volatility associated with the portfolio, which
explains the returns fluctuating wildly over the years.

My returns
profile is as follows:-

2012: +35.0%

2013: +41.5%

2014: +3.5%

2015: -23.4%

2016: -1.7%

2017: +12.1%

2018: -8.1%
(YTD July 2018)

Total portfolio CAGR from 2007-2017 = +7.1% per
annum (inclusive of dividends)

The strong
performances in 2012 and 2013 were due mainly to positions in MTQ and Kingsmen
which increased significantly, and the large drawdown in 2015 was due in part
also to the subsequent crash in oil prices which caused a sharp re-valuation in
MTQ and also the luxury spending troubles which plagued Kingsmen in late-2015,
causing NPAT to fall over the last three years and dividends to be cut from the
4c/year level to the current 2.5c/year level. 2016 and 2017 were years where I
built up the portfolio to become more diversified and robust, relying on less
concentration than before, though my largest positions still accounted for
around ~40% of the portfolio. REITs were added just last year in order to form
a stable base of dividends but also with an element of growth, as the gearing
levels for these REITs allow for debt headroom for M&A and each REIT also
has a long WALE with higher overall occupancy rates. I will be describing some
of these new positions in detail in subsequent posts, and will also be revisiting
existing positions which I have held since 2012 (namely Kingsmen Creatives,
VICOM and Boustead) to check on the thesis and why I would still be adding to
two of them.

A summary of
transactions since Jan 2012 is provided below:-

2012 & 2013

No additions
or divestments

2014

·Increasing stake in Kingsmen
Creatives

·Purchase of Straco Corporation

·Divestment of SIA Engineering

2015

·Acceptance of scrip dividend from
Boustead Singapore

·Dividend-in-specie of Boustead
Projects

·Purchase of Design Studio Group

2016

·Increasing stake in Design Studio
Group

·Increasing stake in Boustead
Projects

·Increasing stake in Boustead
Singapore

2017

·Increasing stake in Kingsmen
Creatives

·Purchase of iFast Corporation

·Purchase of Frasers Logistics
& Industrial Trust

·Purchase of Keppel DC REIT

2018 (Year to Date)

Increasing stake in Kingsmen
Creatives

·Subscription to and acceptance of
rights issue (1 for 10) for FLT

·Purchase of NetLink NBN Trust

·Purchase of Boustead Singapore
(CPF Investment A/C)

·Purchase of Kingsmen Creatives
(CPF Investment A/C)

I would like
to emphasize again that the portfolio has been structured to withstand a large
drawdown and to remain resilient in the face of economic shocks. It is NOT
geared towards high returns and to capture maximum upside. The main aim is to
buffer against downside by purchasing companies with strong balance sheets, good
cash balances and which generate healthy amounts of FCF.

My next post would be
the month-end post where I will summarize any corporate news flow or earnings
announcements from the companies I own.

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